Exclusive-Some investors offering Ethiopia maturity extension on 2024 bond – sources

By Jorgelina do Rosario and Karin Strohecker

LONDON (Reuters) – An informal group of international bondholders has proposed to Ethiopia’s government to extend the maturity of the country’s $1 billion eurobond issue coming due in 2024, three sources with direct knowledge of the matter told Reuters.

The proposal involves the debt maturity being extended to 2029 or 2030 as well as an amortising structure to avoid a big lump-sum payment at the end, with the last five years seeing repayments of $200 million a year, said one of the sources, who like the others asked not to be named because talks are private.

“There have been a number of approaches, but so far without getting any response” from the government, the source added.

The Ethiopian government, which to date has not defaulted on any payments on the dollar-denominated bond, did not immediately respond to a Reuters request for comment on the proposal.

Africa’s second-most populous country in early 2021 requested a broader debt rework under the Group of 20’s Common Framework, an initiative for restructuring government debt aimed at low-income countries. But progress has been complicated by a two-year civil war that broke out in November 2020, killing thousands of people and displacing millions.

The International Monetary Fund (IMF) said in a statement following a visit last June that a debt treatment under the G20 Common Framework was “essential to reduce debt vulnerabilities” for Ethiopia.

The IMF estimated government debt-to-GDP at 46.4% last year and reserves covering only around three weeks of imports – well below the three months seen as a safe minimum.

The international bond only makes up a small part of the country’s total external government debt, which stood at $27.4 billion in the third quarter of last year, according to World Bank data.

The sources said the proposal to extend the eurobond maturity foresees a coupon of 6.625% – the same as the current one on what was originally a 10-year bond that is the country’s only outstanding international note.

The next coupon payment on the 2024 bond is due in June, with the issue trading at around 68 cents in the dollar and yielding more than 30%, according to Refinitiv data. It has a long-term rating of CCC- from Fitch Ratings, which means it is a substantial credit risk with a real possibility of default.

International bondholders have not formed a private creditors committee for the extension proposal because Ethiopia has continued to service the bond normally, two of the sources added. They declined to provide details on the informal group’s membership.

Recent filings show that Franklin Templeton Fixed Income Group and Allianz Global Investors U.S. LLC are some of the holders of the bond, according to EMAXX data.

Ethiopia’s civil war had delayed progress with creditors on a broader debt workout. A bilateral creditors committee co-chaired by France and the largest bilateral creditor China committed to granting debt relief last August, but further progress requires a deal with the IMF.

In November, Ethiopia’s government and the Tigray People’s Liberation Front agreed to stop fighting and signed a truce laying out the roadmap for implementation of a peace deal, paving the way for a much-needed IMF funding programme.

The nation of 115 million has been one of the world’s fastest-growing economies in the past 15 years, boosted by heavy infrastructure investment, but the COVID-19 pandemic and the conflict that has now subsided have slowed expansion in recent years. The IMF estimates that Ethiopia’s economy will grow by 5.3% this year.

(Reporting by Karin Strohecker and Jorgelina do Rosario; additional reporting by Dawit Endeshaw in Addis Ababa and Rachel Savage in Johannesburg; Editing by Jamie Freed)